HOW IS YOUR CREDIT SCORE COMPUTED?
Most consumers that get a copy of their credit report for the first time have
no idea what all those numbers mean or how they are computed let alone
how to read credit
reports. It really is
not that difficult to understand and educating yourself with what the
variables are the make up your credit score will help you with your credit
for years to come.
Who are the players?
Three major credit bureaus, Equifax, Experian, and Trans
Union, compute consumer credit scores. Each one of these
companies have their own statistical model that they use to
calculate scored based on your personal credit history.
There are approximately thirty variables that are utilized
in the determination of your score. Certain factors, like
your credit card and loan payment histories, are going to
bear more impact than other aspects of your credit history.
It is also important to consider that every person is
different and that a factor that may be important to your
score may not have as much of an impact to someone else as a
result of disparities in your credit past. In addition, the
importance of each factor will changes as your credit report
changes and has updated information added.
There are five wide-ranging areas that credit bureaus
will look at when computing scores. Below are the percentage
- Outstanding Debt- The total amount that you
owe compared to your available credit limit makes up 30%.
Total amount owed and the ratio of what's owed to your
credit limit is factored in for another 30%.
- Payment History - Neglect to make a credit
card, loan, mortgage, etc. payment on time and expect your
to be negatively impacted. In fact your payment history
makes up about 30% of your total score.
- Pursuit of New Credit - Any application of
credit, the status of new accounts and how new these
accounts are make up 10% of your score. * Credit History-
How long have you been building a credit history? How long
have specific accounts have been established and how long
have you used each account? On average, this category
determines about 20% of your score.
- Category of Credit Being Used - 10% of your
score is going to be determined by what kind of credit you
are utilizing. Specifically, how may accounts you have and
what types of accounts, i.e. installment loans, credit
cards, department store cards, etc..
Learn more about
credit really is.
What is a
Importance of Checking Your Credit Report Once a
Making Sure Your Credit Report is Accurate
The Impact of Too Many Inquiries on Your Credit Report
Correcting Your Credit Report
Writing a Dispute Letter -
Sample Dispute Letter
Impact of Bad
The Most Difficult Credit Items to Resolve?
Common Questions Related to Credit Reports
Things That Hurt Your Credit Score
Credit Report Secrets
How Long Do Negative Marks Stay On My Credit Report?
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